1. Describe the importance of inventory management as it relates to the Farmers Restaurant.

In addition to inventory management being important to Farmers Restaurant, it is important to business in general. Since Farmers Restaurant is a full-service restaurant, it must have effective management with its inventories in order to properly serve its customers. It is important for that to be the case so that there will be desirable customer satisfaction and customer return. In the case that customers visit the Farmers Restaurant and are unable to receive the food they want due to a stock out, they may be dissatisfied and will likely not return to Farmers Restaurant. Besides customer satisfaction, total food costs are important to business …show more content…

There are currently 3 packs in inventory = 6 units.
LT = 2 days = 2/7 weeks
OI = 1 week

Given the information contained in Table B of Appendix B, we can determine the z value corresponding to .95. Since .95 is between .9495 and .9505, there are two values for z, so we have z = 1.64 (corresponding with .9495) and z = 1.65 (corresponding with .9505).

If we use z = 1.64, the answer is:

45.51 = 46 units = 23 of the 2-packs.

If we use z = 1.65, the answer is:

Q = 45.55 = 46 units = 23 of the 2-packs.

4. Given the above information and an on-hand inventory of 12, determine the risk of stock out at the end of initial lead time and at the end of the second lead time. The lead time is 2 days and orders are placed once a week.

The given information includes: d = 35 units/week σd = 3.5 units/week
Gravy mix comes in packs of 2.
There are currently 3 packs in inventory = 6 units.
LT = 2 days = 2/7 weeks
OI = 1 week
A = 12

Formula 13-13 can be used to determine the risk of stock out at the end of the initial lead time:

12 = 35(2/7) + z(3.5)
12 = 10 + 1.871z
2 = 1.871z z = 1.07

Given the information contained in Table B of Appendix B, we can find the corresponding service level, which is .8577. Based on that value, the risk of a stock out = 1 -.8577 = .1423 = 14.23%.

Formula 13-16 can be used to determine the risk of stock out at the